What is Binance Coin (BNB)?

Binance is known to the crypto community as the largest crypto exchange in terms of cryptocurrency trading volume. It was founded in 2017 by tech entrepreneur Changpen Zhao (known as “CZ” on Twitter). Binance coin (BNB) is the native token of this exchange and has broken into the top 4 largest cryptocurrencies in terms of market capitalization in just 4 years. Let’s take a look at how it works.

What is Binance Coin (BNB)?

Let’s rewind the clock to July 2017. Binance, a fledgling cryptocurrency exchange, launched an Initial Coin Offering (ICO) for its native token, Binance Coin (BNB). The ICO raised approximately $15 million, and BNB was initially issued as an ERC-20 token on the Ethereum blockchain. Fast forward to today, and Binance is one of the world’s largest cryptocurrency exchanges, with BNB sitting comfortably among the top 10 cryptocurrencies by market capitalization.

The main purpose of the BNB was to be used as a medium of exchange on Binance, where traders are offered discounts on trading fees if they use BNB. Today, BNB is a utility token with multiple use cases:

• Trading fee discounts: Holders get discounts on trading fees on the Binance exchange.
• Participation in token sales: Binance Launchpad often requires BNB to participate in new token sales.
• Staking: You can stake BNB to earn rewards on various platforms.
• DeFi and NFTs: BNB is widely used in the DeFi ecosystem and for minting NFTs.
• Payment method: Some merchants accept BNB as a form of payment.

History

BNB was created through an ICO in 2017. In 2019, Binance took a significant leap by launching its own blockchain, Binance Chain, and migrated BNB from the Ethereum network. This move was not just a technical upgrade. It was a strategic maneuver to create an entire ecosystem around BNB. September 2020 marked another pivotal moment in BNB’s history with the launch of Binance Smart Chain (BSC). Designed to run parallel to Binance Chain, BSC aimed to offer a platform for decentralized applications (dApps) and smart contracts. This move was a game-changer, opening up new avenues for BNB’s utility, including DeFi, NFTs, and more.

While BNB has seen meteoric rises, it hasn’t been all smooth sailing. Regulatory scrutiny has been a recurring theme, especially in 2021, when several countries raised concerns about Binance’s operations. Despite these challenges, BNB has shown resilience, adapting to regulatory requirements and continuing its growth trajectory.

Historical milestones:

• 2017: Binance issued Binance Coin (BNB) as an ERC-20 token via ICO in July. 40% of the tokens were issued to founders, 10% to initial investors, and 50% sold to the public.

• 2018: Binance and others raised more than $30 million for stablecoin.

• 2019: BNB moved away from the ERC-20 standard and migrated to the BEP-2 standard. This means that BNB moves to the BNB Chain. The same year, the BUSD stablecoin entered into force.

• 2020: BNB establishes itself as a top 10 cryptocurrency in the world.

• 2021: BNB grows exponentially on account of the general popularity of cryptocurrencies and in particular the Binance exchange in combination with the Binance Smart Chain. In June 2021, the NFT marketplace opens.

• 2022: Several plans are presented for BNB, including an increase in the set of validators from 21 to 41, which could mean more decentralisation of the network, and the introduction of a next-generation side chain that can increase transaction speeds to 10,000 TPS.

• 2023: Binance launches the Binance Chain Accelerator Fund to support the development of early-stage projects on the BSC. This fund is worth $100 million and will provide investment and support to projects that are building innovative and high-quality applications on the BSC. Also, Binance launched the opBNB mainnet. It is their Layer 2 solution built using OP Stack. This means that Binance Smart Chain now also has super cheap transactions.

How does Binance Coin (BNB) work?

When developing the BNB chain, Binance specifically engineered the blockchain to excel in on-chain trading, serving as the foundation for Binance DEX, their decentralized exchange. Additionally, transactions on the BNB chain are powered by a blockchain gas token, BNB, an acronym for “Build and Build,” formerly known as Binance Coin.

Binance Chain

Binance Chain uses a consensus model known as Tendermint BFT. It prioritizes speed and throughput. It’s not designed for complex smart contracts but is incredibly efficient for trading and transferring tokens. The native asset, BNB, can be used for various purposes, like paying trading fees or participating in token sales on Binance’s Launchpad. Binance Chain boasts with following features:

• High throughput: Capable of handling thousands of transactions per second (TPS).
• Low fees: Transaction fees are minimal, making it cost-effective for users.
• DEX Support: Binance Chain is home to Binance DEX, a decentralized exchange that allows for peer-to-peer trading.
• Limited smart contracts: Binance Chain is not designed for complex smart contracts, focusing instead on asset management and trading.

Binance Smart Chain (BSC)

BSC is where the magic happens for developers. It’s EVM-compatible, meaning it can run Ethereum-based applications. BSC uses a consensus mechanism known as Proof of Staked Authority (PoSA), a hybrid between Proof of Authority and Delegated Proof of Stake. This allows for faster block times and lower fees than Ethereum, making it a popular choice for DeFi projects.

• EVM compatibility: Run Ethereum-based dApps without any modifications.
• Dual chain architecture: Seamlessly transfer assets between Binance Chain and BSC.
• DeFi and NFTs: BSC has become a hub for decentralized finance (DeFi) projects and Non-Fungible Tokens (NFTs).
• Consensus mechanism: BSC uses a unique Proof of Staked Authority (PoSA) consensus, combining elements of PoA and DPoS, allowing for a more decentralized network.

BNB Token Burn

Each quarter, Binance allocates a portion of its earnings to buy back and permanently remove BNBs from circulation, a practice that has been consistently carried out since 2017. The company plans to persist with these quarterly BNB burns until it has eliminated 100 million Binance Coins, equating to half the initial maximum supply. This reduction in supply inherently influences the scarcity of the asset, which could, in turn, impact its market value. Additionally, Binance operates the BNB Pioneer Burn Program. This initiative assesses specific cases where BNB holders have irretrievably lost their tokens and compensate them by deducting the equivalent amount from the subsequent BNB burn.

So, what does this mean for BNB holders and the broader crypto market? Let’s break it down:

• Scarcity: By reducing the supply, BNB becomes more scarce.

• Value proposition: Theoretically, a decrease in supply could lead to an increase in price, assuming demand remains constant or increases.

• Investor confidence: Regular token burns can instill confidence among investors as it shows a commitment to the token’s long-term value.

• Utility: The burn doesn’t affect the utility of BNB; it can still be used for trading fee discounts, participating in token sales, and more.

It’s important to note that despite the burn, BNB is still subject to broader market trends and as well that any regulatory action against Binance could impact BNB’s value. Lastly, the anticipation of a token burn can sometimes lead to speculative trading, causing price volatility.

Where Can I Buy BNB?

You can buy BNB on all major exchanges, but of course, it makes the most sense to do so on the Binance crypto exchange, where you can use the token. Purchase as you would for any other cryptocurrency. Once you have BNB in your wallet, you can set it up to pay your fees, giving you a 25% discount:

1. Go to your Binance profile
2. Go to Dashboard
3. Go to the Your trading fee level page
4. Turn on the button that says Use BNB for trading fees

Once you’ve enabled BNB for trading fees, a portion of your BNB holdings will automatically be used to pay for any trading fees on Binance. Here’s the kicker: you get a discount for doing so. First year, you get 50% discount on trading fees. Using BNB for trading fees is not just about the discounts. It also simplifies the trading process by automatically deducting the fees from your BNB balance, saving you the hassle of calculating fees for each trade. The more BNB you hold, the higher your chances of becoming a VIP member on Binance, which comes with even more perks. On top of that, holding BNB also allows you to benefit from Binance’s quarterly token burns, potentially increasing the value of your holdings over time.

How Can I Use BNB?

Primarily developed as a trading commission rebate token in 2017, the BNB has many uses today:

• Trading: BNB can be exchanged for other cryptocurrencies on various exchanges. Given that this cryptocurrency has grown by 22,000% in its first six months of existence, its popularity among traders is understandable.

• Trading fee discounts on Binance: One of the most straightforward applications of BNB is to avail discounts on trading fees on the Binance exchange. To do this, you’ll need to log into your Binance account, navigate to the account settings, and toggle on the option that allows you to use BNB for trading fees.

• Access Binance Launchpad: Another intriguing use case is participating in token sales via the Binance Launchpad. You’ll need to hold a certain amount of BNB in your Binance account to get involved. Token sales often follow a lottery system, and holding BNB can earn you lottery tickets.

• Yield farming and staking: BNB isn’t just a token you can trade; it’s also an asset you can stake to earn rewards. You can use Binance’s staking platform to earn yields on your BNB. Alternatively, you can venture into the world of decentralized finance (DeFi) on Binance Smart Chain and use BNB to farm other tokens.

• DeFi and NFT: With the advent of Binance Smart Chain (BSC), BNB has carved a niche for itself in the burgeoning sectors of DeFi and non-fungible tokens (NFTs). You can use BNB to provide liquidity in various DeFi pools. If you’re an art aficionado or a collector, BNB can also be used to mint, buy, and sell NFTs on platforms that are built on BSC.

Price Performance

• 2017: BNB’s price performance has been remarkable over the past few years. In 2017, BNB started trading at around $0.10. By the end of the year, it had reached a price of $20.12, representing a staggering return of over 20,000%.

• 2018: the cryptocurrency market experienced a severe bear market. However, BNB held up relatively well, only losing around 50% of its value. By the end of 2018, BNB was trading at around $11.19.

• 2019: the crypto market began to recover. BNB benefited from this recovery, and its price increased by over 100%. By the end of 2019, BNB was trading at around $20.12.

• 2021: The bull run. The crypto market reached new all-time highs. BNB was again one of the biggest beneficiaries of this bull market, and its price reached an all-time high of $600 in November 2021.

• 2022: Bear market hits. The price falls to about 300$ and stays in the range.

• 2023: the cryptocurrency market has experienced a significant bear market. However, BNB has held up relatively well, only losing around 50% of its value.

BNB: Pros

• A versatile utility token: BNB is not just a token; it’s a utility powerhouse. Whether you’re looking to get discounts on trading fees, participate in token sales on Binance Launchpad, or dive into the DeFi ecosystem on BSC, BNB has got you covered.
• Strong ecosystem support: With Binance being one of the largest crypto exchanges in the world, BNB enjoys robust ecosystem support. The continuous development of the Binance Chain and BSC means that BNB will likely remain relevant for the foreseeable future.
• Dual chain architecture: The dual-chain architecture of Binance Chain and BSC offers the best of both worlds. While Binance Chain is optimized for speed and trading, BSC is designed for smart contracts and decentralized applications, giving BNB a unique edge in the market.
• Tokenomics and scarcity: BNB employs a deflationary model, with regular token burns designed to reduce the total supply. This creates scarcity and could potentially drive up the value of the token over time.
• Lower transaction fees: Compared to Ethereum, BSC offers significantly lower transaction fees, making it a popular choice for DeFi projects and users who are sensitive to high gas costs.

BNB: Cons

• Centralization concerns: Despite its decentralized aspirations, BNB is closely tied to the Binance exchange and its CEO, Changpeng Zhao. This centralization could be a double-edged sword, as any negative news or regulatory actions against Binance could impact BNB’s value.

• Regulatory risks: BNB’s close association with Binance makes it susceptible to regulatory scrutiny. With regulators around the world tightening their grip on crypto exchanges, BNB could face challenges ahead.

• Smart contract vulnerabilities: While BSC has attracted a plethora of DeFi projects, it’s also been the target of numerous hacks and exploits. The smart contract vulnerabilities on BSC could indirectly affect the reputation and utility of BNB.

• Market competition: The crypto space is highly competitive, with Ethereum 2.0 and other Layer 1 solutions vying for market share. BNB will need to continuously innovate to stay ahead of the curve.

Conclusion

There is no denying that the fate of Binance is closely linked to Binance’s success as an exchange. While Binance is slowly phasing out the trading discount provided by the Binance coin. It is looking for other ways to make the coin “valuable.” Consequently, its meteoric rise to the top echelons of the crypto market is a testament to its versatility, strong ecosystem support, and innovative dual-chain architecture. From trading fee discounts to its role in decentralized finance and non-fungible tokens. Surely, BNB has carved out a unique space for itself in the crypto landscape. However, it’s crucial to remember that every rose has its thorns. BNB is not without its challenges, including concerns about centralization, regulatory scrutiny, and the ever-present risks associated with smart contract vulnerabilities. The crypto market is a competitive arena, and BNB will need to keep evolving to maintain its edge.

So, whether you’re considering investing in BNB or are simply intrigued by its multifaceted utility, remember that knowledge is power. However, stay informed, stay savvy, and as always, do your own research before making any investment decisions.

Share Our Content on Social Networks:

FAQ